Foreclosures: Low-income Housing?

April 16, 1989|By Lettice Stuart, N.Y. Times News Service.

HOUSTON — A pilot program is getting underway here and in three other cities to see whether foreclosed and vacated residential property can be transformed into housing for low- to moderate-income people.

The federal National Mortgage Association, known as Fannie Mae, has chosen Houston, Austin and San Antonio as well as Denver for its experiment.

Fannie Mae is a federally sponsored private corporation that buys packages of home loans from the institutions that originated the loans.

The Texas cities are among those that have been hardest hit by the housing recession that followed the collapse of oil prices in the mid-`80s.

Despite a significant drop in the last year, foreclosures in Texas still are substantial, and Houston leads the list.

In the pilot program, undertaken in partnership with the National Association of Housing and Redevelopment officials, Fannie Mae hopes to sell foreclosed properties to public-housing authorities in the four cities.

As the one- to four-family properties are foreclosed, they will be offered to the housing authorities at a 14 to 15 percent discount from the price that they normally would be marketed for through private brokers after necessary repairs were made.

Fannie Mae will be able to discount prices by reducing its holding time from an average of six months to several weeks, by not making repairs to the properties and by not paying commissions to real estate brokers who normally sell the foreclosed homes once they are repaired.

The housing authorities then will have the option of renting out or reselling the property to the low- and moderate income people it serves.

Total foreclosures in Houston reached a peak of 31,000 in 1987, 90 percent of them residences, and declined to 20,000 in 1988, according to Ralph Murdock at Foreclosure Listing Service, a real estate investment publication. But that is still a long way from the total of only 1,300 foreclosures in 1981, when Houston`s economy was expanding.

The service does not break down its figures by type of residential property: single-family, two-family or multifamily.

Tom Walker, president of the Greater Houston Builders Association, predicts that foreclosures will fall by more than 50 percent in 1989, to 9,000.

Fannie Mae`s own inventory of foreclosed properties has declined substantially in Houston, from 2,300 when it opened a satellite office in 1985 to help sell the properties, to about 800 currently. Statewide, Fannie Mae has about 2,000 foreclosed properties, more than in any other state.

``We are extremely encouraged by the fact that the numbers are moving downward,`` said Patrick O`Neill, head of Fannie Mae`s foreclosed properties division.

Now the object is to see whether the homes can to some extent become a housing resource for lower- to moderate-income people. The indications so far are that the housing authorities themselves are approaching the program cautiously.

The Houston Housing Authority participated in a similar program in 1987 when it bought 207 homes repossessed by the Federal Housing Administration.

The three- and four-bedroom homes, which cost the authority an average of slightly more than $30,000 each, then were rented to tenants with annual incomes of $13,000 to $25,000.

Despite controversy sparked by residents who opposed having low- and moderate-income neighbors in scattered-site public housing units and from real estate brokers upset over losing potential commissions, the program was a success, according to Earl Phillips, Houston`s Housing Authority director.

Opposition to the Fannie Mae program is expected from both groups, but Phillips notes that tenants were screened carefully in the FHA program, and similar screening and training will be done in this one.

The tenants in the FHA program were required to pass an 18-hour preoccupancy training course teaching housekeeping and minor home maintenance skills and to pass a criminal and credit check.

Actually, Phillips said, neighborhood residents had more assurances that they were getting acceptable neighbors than they would have had in the private market.

At this point, neither the Houston Housing Authority nor the Harris County Housing Authority, which includes all of the unincorporated areas in the metropolitan area, has agreed to participate in the Fannie Mae program.

Both have expressed interest and acknowledge a severe public housing shortage in the area.

If housing officials in Houston, or any other city, should turn down participation, Fannie Mae officials said, the offer would be taken to other cities, with perhaps a renewed offer in the future to the reluctant cities.

Houston, the country`s fourth-largest city, ranks 25th in the size of its public housing stock.

The Houston Housing Authority has a waiting list of 13,000 families for its 12,450 already-occupied units.

Phillips, who also is president of the National Council of Large Public Housing Authorities, admits that the city`s low- and moderate-income population is grossly underserved.